Harsh Winter Shocks and Distress Sales: Consumption and Asset Smoothing Among Livestock Farmers in Kyrgyzstan

ABSTRACT The sale of livestock has long been considered a means of mitigation in case of drought, but there is no evidence of how this is achieved in the event of severe winters. This article focuses on the exceptionally harsh winter days that Kyrgyzstan experienced in 2012, as well as harsh winter days in other years, to analyse how livestock owners responded to the shock. Our quantitative analysis is based on nationally representative household panel data combined with geo‐referenced daily temperature data. The results of the fixed effect regression show a heterogeneous household response to harsh winter days consistent with a poverty trap, which is supported by qualitative evidence. Rich households sell their animals to smooth consumption, while poor households prioritize protecting their scarce assets and are generally unable or unwilling to sell. While this asset‐preserving strategy may support long‐term economic resilience, it is associated with statistically significant declines in food consumption among poor households during severe winter shocks, indicating a trade‐off between short‐term welfare and asset protection.